Corporate Tax Planning

Talking about corporate tax planning, probably most of the entrepreneurs will agree to the fact that taxation has the most dynamic and complex challenges to represent. It’s within most of our knowledge that the tax, regulatory and legal developments have a significant impact on the business operations. 

Having insights of professional tax experts at your back can effectively aid you in tax planning. We at VJM & Associates LLP have a team consisting of the corporate tax and international tax professionals. The hands-on experience of our professional domestic as well as international tax planning experts can structure your business in the most optimal way. 

Corporate Tax Planning

Know More about Corporate Tax

Both public and private companies registered in India, as per the Income tax Act 1961, need to pay corporate tax. Corporate Tax is the direct tax levied on the net income or profit of the business entity registered in India.

The corporate tax in India is computed on the net revenue/profit of a company after considering necessary additions and deletions as per Income Tax act, 1961. 

Moreover, the corporate tax is levied on the amount left with the company after meeting necessary expenses. There are actually a host of expenses a company goes through when selling their goods or services. Following are the illustrative list of expenses that we can consider primarily,

  • Depreciation
  • Expenses drawn for administrative purposes
  • Total cost of goods or services sold
  • Selling expenditures
In India, corporates are classified in different categories. One is domestic corporations and the other one is foreign corporations. However, the tax rates are different for domestic and foreign corporations. Domestic Corporations are those which are established in India and registered under the India’s Companies Act, 2013. Whereas, a foreign corporation is a company whose management and control is situated in countries outside India.
Type of Company Corporate Tax Rate   Surcharge (computed on net Income Tax Liability)
Surcharge on Net Income Less than Rs. 1 crore Surcharge on Net Income greater than Rs. 1 Crore and less than Rs. 10 Crore Surcharge on Net Income greater than Rs. 10 Crore
Domestic with annual turnover upto Rs 400 Crore 25% Nil 7% 12%
Domestic Company with turnover more than Rs 250 Crore 30% Nil 7% 12%
Foreign Companies 40% Nil 2% 5%
  • Income Tax: The income tax is actually paid by persons from their income other than business entities. There are various rates associated with the different slabs of incomes. Corporate Tax: Income tax levied on companies registered under Companies Act, 2013 is corporate tax. The corporate tax is deducted from the net income of a company. For the purpose of computation of Income tax, various additions and deletions are made from taxable income as per provisions of Income Tax Act, 1961. Taxability of income under different heads of Income Tax Act, 1961 Before calculating the tax rates and how the computation of corporate tax works, we need to know about the classification of Income of the company under different heads. Income Tax Act has classified the company’s income under 4 heads:
    • Income under head Profit from Business or Profession (PGBP): Under this head, income or profit from business/profession is considered.
    • Income under head Capital Gains (CG): Under this head, profit/loss arise on sales of capital assets is taxed..
    • Income under head House Property: Income from renting of immovable property is considered under head House property. 
    • Income under head Other sources: Income not covered under any of the above mentioned head is taxed under Other sources such as interest income, dividend income etc.
A fruitful corporate tax planning is required to strengthen the business affairs. To maximize the revenue by paying minimum taxes after rebates, exemptions and deductions.  There’s a risk factor involved in tax management for those business sectors holding a huge capital and there’s no knowledge of their finances.  There are lots of tax consultants in India who deal with the tax management process for the implementation of corporate taxations. Definite information about tax laws and correspondence, awareness can ensure a successful corporate tax planning.  There’s a gap between tax planning and evasion of taxes. Tax planning is conducted with the act of paying less taxes and increasing the profit gains in an ethical way, i.e., minimizing payment of taxes using measures given in law itself. Tax planning is always regulated under the financial rules and regulations of the Indian Government.
Definitely, an experienced professional can manage the corporate tax concerns of your business. To balance your tax process, technological integrations, laws and regulations there are several strategies that can reduce the risk factor involved in today’s tax structure.  Our corporate tax planning services are beneficial to the companies that have already experienced or planning for a transformative changes like:
    • Authority Changes
    • Technological Incorporation
    • Expansion of business into new sectors
    • Significant Regulatory Adjustment
In this continuously changing business environment, the corporate sectors are constantly meeting the complexities in tax planning, tax compliances and financial reporting.  Only the industry specialist can adjust the persistent tax department assets to help the affected companies.  Financial scrutiny requires a high level of acquisition, accuracy and internal controls.  VJM and Associates LLP is a trustworthy and reliable advisor that helps to develop a deep bonding with the clients under any jurisdiction.  We rectify the risky areas and offer the quality solution to lighten the tax burden and tax compliance submissions. We believe in efficiency, expertise, and work reputation that has been notified by our clients.  We have corporate tax consultants & specialists who harmonize with our local, international and federal tax technology associates to solve the issues related to your tax concerns. These are the factors we considered first:
    • Tax conformity across national, international and under every jurisdiction
    • Income tax accounting
    • Improvement in the workflow and process
    • A proper tax planning strategy
    • Optimization of tax technology
    • Improved tax consultation
It doesn’t matter that your company is small or large, or a flourishing or established business, our special tax professionals equally provide services. From their years of experience in tax accounting and resources, they will carry out these functions to:
  • Provide the details of your annual tax accounting statements and accounting analysis related to income taxes
  • Minimize the impact of huge income taxes
  • Help you to get the adequate data of your tax filings
  VJM and Associates LLP corporate tax expertise possesses the experience of multinational corporations and former tax consultants. We work with full accuracy and efficiency from the ground level. Where the taxation laws is evolving and changing consistently, our team provides comprehensive solutions to control complex tax issues. The key areas where our team focuses-
  • Income tax accounting
  • Conformance of income tax Act 1961
  • Annual tax planning preparation and return policies
  • International tax planning provides better tax accounting methods
  • An accurate audit support and tax compliance planning

FAQ on Corporate Tax

In India the taxation system is classified into two sections- Direct Taxes and Indirect Taxes. Direct tax is levied on the person who earns the income and such person can’t pass on the incidence of tax to another person. Whereas in case of Indirect tax, incidence of tax is passed on by one person to another person. Income tax is a form of Direct Tax.  It’s already been discussed above how the tax rates are varied for every taxpayer. Under the provisions of the Income Tax Act, every business organizations is liable to pay corporate taxes. And the companies are divided on the basis of their setup as Domestic Company & Foreign Company. Now domestic companies are liable to pay income tax on income earned in Income and Outside Income. Whereas, a foreign company is liable to pay tax on the revenue earned in India.
For your information, tax planning is financial analysis prepared from the tax report. To ensure the minimisation of tax liability and increase the tax efficiency we require a definite tax planning. The whole objective to corporate tax planning to reduce the income tax burden on companies by utilising the tools given under the Income Tax Act, 1961.
Since the burden of the Corporate Tax can’t be passed on to other persons therefore, it’s a clear fact that the Corporate Tax is a form of direct taxes.
This is the frequently asked question regarding the rates of  corporate taxation. There are specific rates mentioned as per the Income Tax Act, for different business sectors. The rates applicable for the domestic entities depending on their annual turnover:
  • Gross Turnover Upto INR 400 Crore (FY 2017-18 onwards) – 25%
  • Gross Turnover That exceeds INR 400 Crore- 30%
The rates applicable for foreign Companies:
  • Any fees or royalty, received from the Indian government or an individual for technical assistance the tax rate is 50%
  • For any other forms of incomes- 40%
  • Health & educational Cess:
In addition to the above rates, 4% of the tax accumulated and further surcharge will be counted to the total tax liabilities before the cess.
Dividend of Distribution Tax (DDT)- As per Income Tax, every domestic company is required to pay DDT on dividend declared, distributed or paid by the company during the financial year. However, Finance Act, 2020, has abolished the concept of DDT. Therefore, with effect from 1st April, 2020, dividend income is liable to tax in hands of the recipient.
For every developing country the significant amount of money for the public services accumulated from the corporate taxes. Corporate tax plays an essential part in the tax system. Because the tax collected from the corporate tax is being used for the welfare and national source of income. The income tax is collected on net profit computed after deducting the cost of goods solds and depreciation and other admissible expenses from total income. Hence, filing corporate tax is important for both the business organizations and public services.
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As per The Companies Act, ROC compliances mainly include Annual filing. Apart from Annual filing, disclosure by directors, annual return draft, and updating the Statutory Register undergo ROC compliances. ROC compliances are mandatory. Any slack or negligence can lead to penalties, fines and other legal issues pertaining to the Company.

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GST Registration is an online process involving submission of several business details along with certain supporting documents. Prior to the GST registration, a critical analysis of various business and transaction aspects like – nature of business, types of supplies/ services, category of registration etc. are required to be undertaken.

We, at V J M Associates LLP are equipped to provide qualitative value added services through the entire process of GST registration.

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With a dedicated team of Chartered Accountants in Delhi, offer a wide range of services on how to maintain your companies and manage corporate income taxes including bookkeeping, accounting, financial statement preparation, electronic data transfer, corporate tax return preparation and paralegal services like preparation of annual shareholder report, tax refund, director resolutions, and annual filings.

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Blogs on Company Law

Amendments by The Finance Act, 2020

15 important changes in Income tax applicable from 2020 onwards

Hon’ble Finance Minister presented the Budget for the Year 2020-2021 on 1st February, 2020. This budget was a landmark budget so far as it introduced notable amendments providing major relief across all the sectors, ranging from individuals to the corporates. Amendments were provided for both Income Tax Act and Goods and Service Tax Act and various other important statues.

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